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The company's re-commitment to its wholesale data center focus, announced in November, did not take long to pay off for investors.

DFT reported a record 46.83MW in signed leases for 2015, including 12 leases for a combined 32.27MW in the fourth quarter. The results exceeded its previous annual leasing record by more than 5MW.

Notably, it was able to achieve a return on investment of 13 percent on its latest leasing activity, a full 100 basis points above its target return.

Earlier this week, analysts at Evercore ISI upgraded DFT from Hold to a Buy rating and increased the firm's target price from $35 to $37 per share, prior to earnings, which represented potential share price appreciation of 14.5 percent from the prior day close at $32.32 per share. In addition, DFT pays an annual distribution of $1.88 per share, currently yielding 5.7 percent, for a total 12 month return of just over 20 percent.

A Rosy Outlook

Data center leasing by web-scale operators, the likes of Facebook and Microsoft, is on the rise, and wholesale data center providers like DFT are reaping the benefits.

"Microsoft's Azure announced their premium services grew nearly 3x year-over-year, with compute usage nearly doubling year-over-year and SQL database usage increasing more than 5x year-over-year," Eldredge said. "The growth in this space is staggering and reinforces our view of a future with tremendous upside."

Notably, DFT derives 60 percent of its revenue from its top four customers: Microsoft, Facebook, Rackspace, and Yahoo. Its tenant concentration may now be viewed more positively by investors, as the hyperscale cloud providers accelerate CapEx spending.

According to a recent market report by the commercial real estate firm North American Data Centers, Apple, Microsoft, and Salesforce signed substantial leases with DFT. Overall, hyperscale companies drove more data center leasing in 2015 than usual, Jim Kerrigan, managing principal at North American Data Centers, told us.

DFT intends to recycle this capital to fund its development pipeline, including a planned expansion into Toronto in late 2017 or early 2018. Other expansion plans include Hillsboro, Oregon (outside Portland), and potentially Phoenix.

DFT booked an impairment of $122 million, or $1.52 per share in Q4, to reflect the actual market value of the NJ1 facility. During 2015, only 2MW of wholesale deals were signed in that market. However, management reported strong demand for NJ1 from retail data center REITs, private equity, and technology companies.

Market Updates

Northern Virginia: ACC7 Phase III (11.9 MW) will be available June 2016. Additionally, DFT just closed on 44 acres of land in Ashburn, Virginia, which will support future development of ACC9 and ACC10, as well as a 10MW powered base shell or build-to-suit.

Santa Clara: On DFT's previous data centers, SC1 and SC2, the ROI was just 9.25 percent. This is a land-constrained market, but pricing is still competitive. The company is looking to "de-risk" development of SC3 by waiting for a pre-lease of 10 MW or more prior to breaking ground. While DFT might not get a 12 percent ROI in this market, management is not willing to break ground until they have a proverbial bird in hand.

ACC9 Phase I and CH2 Phase III are both in the capital plan for development in 2016.

Investor Takeaway

DFT appears to be firing on all cylinders, while its core group of wholesale customers is beefing up capital spending. However, the current conservative balance sheet approach risks taking the foot off the gas pedal.

Notably, a delay in the closing of the NJ1 data center sale could lead to a slowdown in funding for new development deliveries in 2017.

Given the apparent strong demand from hyperscale cloud providers, it might make sense for DFT to enter into a joint venture arrangement on some data centers to free up more capital to meet customer demand. Its Santa Clara data centers might be ideal candidates. The lower unlevered ROI from SC1 and SC2 is less than plan but would still be very attractive to a pension fund or an insurance company as a JV partner.

In addition to hastening earnings growth, this would also help DFT to accelerate its diversification geographically. As it stands right now, entry into the Portland and Phoenix markets appears to be off in the distance, likely not until 2019.